UK economy slowest in six years on Brexit and global worries

LONDON: Britain’s economy slowed sharply in late 2018, pushing full-year growth to its weakest in six years as Brexit worries hammered investment by companies and the global economic slowdown weighed on trade, official data showed.

The pace of economic growth fell to a quarterly rate of 0.2% between October and December from 0.6% in the previous quarter, in line with forecasts in a Reuters poll, while output in December alone dropped by the most since 2016.

“The UK economy lost its summer exuberance in the final months of 2018, and there are signs of further chill winds ahead,” economist Tej Parikh at the Institute of Directors said. Sterling fell by a third of a US cent to below US$1.29.

For 2018 as a whole, growth dropped to its lowest since 2012 at 1.4%, down from 1.8% in 2017.

Exports suffered from global weakness and consumers and businesses grew increasingly concerned about the lack of a plan for when Britain is due to leave the European Union on March 29.

Prime Minister Theresa May has failed to win parliament’s backing for the plan she agreed with Brussels to avoid reimposing checks on goods exported from Britain.

Major economies around the world also slowed in late 2018, due in part to trade tensions between the United States and China, while Brexit is an added challenge for Britain.

Last week the Bank of England chopped its forecast for growth this year by 0.5 percentage points to 1.2%, which would be the weakest year since the 2009 recession.

Yesterday’s data showed net trade lopped more than 0.1 percentage points from the fourth-quarter growth rate. Falling business investment did similar damage.

“GDP slowed in the last three months of the year with the manufacturing of cars and steel products seeing steep falls and construction also declining,” Office for National Statistics statistician Rob Kent-Smith said.

In December alone, the economy contracted by 0.4%, the biggest fall since March 2016.

Finance minister Philip Hammond said the data showed the economy remained “fundamentally strong” and that public-sector forecasters did not foresee a recession.

Business investment dropped 3.7% in the fourth quarter compared with a year earlier, the biggest fall since the first three months of 2010, when Britain was emerging from recession. Investment has contracted for four consecutive quarters, the longest run since the third quarter of 2009.

Household spending – which offered an unexpectedly strong boost to growth in mid-2018 – remained resilient, up 1.9% on a year ago, as did government spending.